The name Diwali is itself a contraction of the word. Diwali involves the lighting of small clay lamps (diyas) filled with oil to signify the triumph of good over evil. During Diwali celebrants wear new clothes and share sweets and snacks with near and dear ones. Some Indian business communities begin the financial year on the first day of Diwali hoping for prosperity the following year.
In Hinduism, Diwali marks the return of Lord Rama to his kingdom of Ayodhya after defeating (the demon king) Ravana, the ruler of Lanka in the epic Ramayana. It also celebrates the slaying of the demon king Narakasura by Lord Krishna. Both signify the victory of good over evil. In Jainism, Diwali marks the attainment of moksha by Mahavira in 527 BC. In Sikhism, Diwali commemorates the return of Guru Har Gobind Ji to Amritsar after freeing 52 Hindu kings imprisoned in Fort Gwalior by Emperor Jahangir; the people lit candles and diyas to celebrate his return. This is the reason Sikhs also refer to Diwali as Bandi Chhorh Divas, "the day of release of detainees". Diwali is considered a national festival in India and Nepal.

Diwali celebration for 5 days :

The first day is Dhan Teras. The last day is Yama Dvitiya, which signifies the second day of the light half of Kartika. Each day of Diwali marks one celebration of the principal stories associated with the festival:

Vasu Baras : On this day the cow and calf are worshiped.

Dhanatrayodashi or Dhan teras: (Dhanatrayodashi | Yamadeepdaan | Dhan Teyras | Asweyuja Bahula Thrayodasi / Dhantheran)This day falls on the 13th day of the second half of the lunar month. It is considered an auspicious day for buying utensils and gold. This day is regarded as the Jayanti of God Dhanvantri who came out during the churning of the great ocean by the gods and the demons.

Naraka Chaturdashi ( Choti Diwali) : (Roop Chaturdashi | Kali Choudas | Mahanisha / Kali Puja | Divvela Panduga / Divili Panduga). Demon Narakasura was killed by Krishna – an incarnation of Vishnu. It signifies the victory of good over evil and light over darkness Hindus wake up before dawn, have a fragrant oil bath and dress in new clothes. They light small lamps all around the house and draw elaborate kolams /rangolis outside their homes. After the puja, children burst firecrackers heralding the defeat of the demon.

Bali Pratipada and Govardhan Puja (Padwa) : (Bestavarsh | Gudi Padava | Varsha Pratipada/ Pratipad Padwa | Annakoot | Bali Padyam / Bali Pratipada | Muharat Pujan). In North India, this day is celebrated as Govardhan Puja, also called Annakut, and is celebrated as the day Krishna – an incaranation of god Vishnu – defeated Indra and by the lifting of Govardhana hill to save his kinsmen and cattle from rain and floods. For Annakut, large quantities of food are decorated symbolizing the Govardhan hill lifted by Krishna. In Maharashtra, Tamil Nadu and Karnataka, it is celebrated as Bali-Pratipada or Bali Padyami. The day commemorates the victory of Vishnu in his dwarf form Vamana over the demon-king Bali. In Maharashtra, it is called as Padava or Nava Diwas (new day). Men present gifts to their wives on this day. It is celebrated as the first day of the Vikram Samvat calender, in Gujarat.

Bhaidooj (also Bhayyaduj, Bhaubeej or Bhayitika) : (Bhai Phota | Bhaubeej / Bhav-Bij | Bhai-Tika | Yamadwitheya / Bhathru Dwithiya | Gorehabba | Bhatri Ditya | Bhathru Dwithiya). On this day, brothers and sisters meet to express love and affection for each other (Gujarati: Bhai Bij, Bengali: Bhai Phota). It is based on a story when Yama, lord of Death, visited his sister Yami. Yami welcomed yama with an Aarti and they had a feast together. Yama gave a gift to Yami while leaving as a token of his appreciation. So, the day is also called 'YAM DWITIYA'.

Reasons not just for Hindus but also for all others to celebrate this great Festival of Lights :

1.Goddess Lakshmi’s Birthday : The Goddess of wealth, Lakshmi incarnated on the new moon day (amaavasyaa) of the Kartik month during the churning of the ocean (samudra-manthan), hence the association of Diwali with Lakshmi. 2. Vishnu Rescued Lakshmi : On this very day (Diwali day), Lord Vishnu in his fifth incarnation as Vaman-avtaara rescued Lakshmi from the prison of King Bali and this is another reason of worshipping Ma Lakshmi on Diwali. 3. Krishna Killed Narakaasur : On the day preceding Diwali, Lord Krishna killed the demon king Narakaasur and rescued 16,000 women from his captivity. The celebration of this freedom went on for two days including the Diwali day as a victory festival. 4. The Return of the Pandavas : According to the great epic ‘Mahabharata’, it was ‘Kartik Amavashya’ when the Pandavas appeared from their 12 years of banishment as a result of their defeat in the hands of the Kauravas at the game of dice (gambling). The subjects who loved the Pandavas celebrated the day by lighting the earthen lamps. 5. The Victory of Rama : According to the epic ‘Ramayana’, it was the new moon day of Kartik when Lord Ram, Ma Sita and Lakshman returned to Ayodhya after vanquishing Ravana and conquering Lanka. The citizens of Ayodhya decorated the entire city with the earthen lamps and illuminated it like never before. 6. Coronation of Vikramaditya : One of the greatest Hindu King Vikramaditya was coroneted on the Diwali day, hence Diwali became a historical event as well. 7. Special Day for the Jains : Mahavir Tirthankar, considered to be the founder of modern Jainism also attained his nirvana on Diwali day. 8. Special Day for the Sikhs : The third Sikh Guru Amar Das institutionalized Diwali as a Red-Letter Day when all Sikhs would gather to receive the Gurus blessings. In 1577, the foundation stone of the Golden Temple at Amritsar was laid on Diwali. In 1619, the sixth Sikh Guru Hargobind, who was held by the Mughal Emperor Jahengir, was released from the Gwalior fort along with 52 kings.
8. Special Day for the Jains: Mahavir Tirthankar, considered to be the founder of modern Jainism also attained his nirvana on Diwali day. 9. Special Day for the Arya Samaj : It was the new moon day of Kartik (Diwali day) when Maharshi Dayananda, one of the greatest reformers of Hinduism and the founder of Arya Samaj attained his nirvana.